Samsung is ordered to pay $1.05B USD in damages; virtually all of Samsung's products likely to be banned in the U.S.

In a shockingly short amount of time, it was revealed this afternoon that the jury has reached a verdict in the Apple vs. Samsung case [1][2] in the U.S. District Court for the Northern District of California. Apple CEO Tim Cook and Samsung CEO Kwon Oh-hyun were given one last chance earlier this week to reach a settlement before the matter was put into the hands of the jury, but those efforts failed.

Deliberations for the case began on Wednesday, and given how impressively complex the case has been with regards to design patent infringement claims and counter claims, this is quite surprising that the jury was able to reach a verdict in such a relatively short amount of time. The jury reported that it reached its verdict at 2:35 p.m. PST on Friday.

I. Background

Apple, Inc. (AAPL) is asking $2.5 billion in damages from Samsung Electronics Comp., Ltd. (KSC:005930) and over 700 issued had to be resolved by the jury in this tangled web spun in the countroom for the past month by lawyers from both sides.

Samsung and Apple are the two largest and most profitable phonemakers in America, with Apple posting several times the profit of Samsung, and Samsung outselling Apple almost 2-to-1 in present quarterly unit sales.

Apple in April 2011 sued Samsung for "slavishly copying" its smartphones and tablets. Samsung responded with a countersuit later that month, and the conflict quickly escalated to courts worldwide.

A Netherlands ruling found Apple innocent and Samsung guilty, but only led to a brief ban on a handful of Apple products; a ruling in South Korea this week found both companies guilty and again only led to a handful of product bans. A German ruling instituted the stiffest ban -- a complete sales prohibition on Samsung's flagship tablets. However, Samsung has been able to circumvent that design-based ruling via redesigning its tablet's shell.

Steve Jobs who masterminded the lawsuit against Samsung, calling for "thermonuclear" war with Samsung and its fellow Android phonemakers, resigned exactly one year ago today and died shortly thereafter.

II. The Verdict

Samsung has been found guilt of violating the '301 ("bounce patent"; all devices), U.S. Patent No. 7,844,915 ("pinch to zoom"; almost all devices), U.S. Patent No. 7,469,381 (all devices), and '163 ("double tap to zoom"; some devices, but not others) technology patents for most of its smartphone and tablet devices.

The '915 patent covers pinch to zoom. Pinch to zoom was first dreamt up decades ago by Myron Krueger and the University of Toronto developed and published papers on virtually equivalent technology almost 25 years prior to Apple producing its first multi-touch device (the iPhone), but Apple claims to have "invented" pinch-to-zoom as it appeared to be the first to do it in the context of a capacitive multi-touch screen.

The Samsung Galaxy S II was one of many Samsung products found to have infringed on Apple patents.

The '301 patent is the so-called "bounce" or "rubber-band" patent, that covers a transient response -- essentially an animation that mimics naturally occurring phenomena, such as a spring. Apple has been granted exclusive rights by the U.S. Patent and Trademark Office to animate this class of phenomena, oft observed visually in nature.

More surprisingly the jury found Samsung guilty of infringing Apple's U.S. Design Patent No. D618,677 and D593,087, which Apple's attorney's argued in testimony give it exclusive rights to produce rectangular smartphones with rounded edges.

The jury found that the Galaxy S (and its various branded names) infringed on both Apple patents, but Samsung's new Galaxy S II smartphone (and its various branded names) only violated the '677 patent.

Samsung did get a small reprieve, being found innocent of similar claims regarding Apple's iPad design patent -- U.S. Design Patent D504,889. None of Samsung's tablets were found to infringe on the '889 patent.

Nearly all the infringement was dubbed willful and that Samsung should have known, which is very bad news for Samsung.
The jury awarded Apple $1.05B in damages.

The jury also ruled that Samsung had not successfully argued any of Apple's patents -- including the design ones -- were invalid.

Samsung, according to the jury, "diluted" Apple's trade dress with the sweeping infringements they found it guilty of.

The jury found Apple innocent of infringing on Samsung's U.S. Patent No. 7,698,711, '893, '460, and '516 patents. Samsung was found innocent of antitrust violations for litigating with its 3G and 4G standards patents, but it was barred from future litigation ("patent exhaustion")

(JM: This is not as bad as it could have been, especially considering that Samsung was found guilty on most counts and that Apple wanted $2.5B USD. Worldwide, Samsung makes close to $4B USD in profit per quarter off its smartphones --so this is between a third to a quarter of Samsung's quartery profit. Severe, certainly, but not enough to remove Samsung from the market.)

III. What's Next

The damages aren't really the worst part of this for Samsung.

The very bad part is that it will no find virtually all of its smartphones banned from sale in the U.S., pending software and design modifications. This could literally cost it several times the damages in lost sales.

Judge Lucy Koh has yet to deliver a final ruling, which will likely include product bans, but that should come in a matter of days. One thing's for sure -- Samsung is going to appeal this, but it's likely to lose billions in the meantime.

The Galaxy S III is spared merely because it was too fresh to be banned, but Apple could use the jury's sweeping ruling as leverage to push for a speedy ban on that device to by the U.S. International Trade Commission.

Apple has done it -- it's quite literally dealt a death blow to the biggest Android phonemaker's U.S. sales.

Funny thing is Samsung seems to be gaining a lot of popularity from this. I live in Silicon Valley and the people I know who are happy owners of iPhones don't even like the ruling. Comments on the internet seem to overwhelmingly favor Samsung.

In the end, the consumer lost. Samsung put out a product that is just as good or even better than what apple put out, at a much cheaper price. That IS a form of market innovation. The design patents these companies hold and the arguments they made in court were so stupid and in the realm of ridiculous.

This is also a little economics lesson showing how the government is often used to create and enforce monopolies, something people too often blame the free market for...

The '301 patent is the so-called "bounce" or "rubber-band" patent, that covers a transient response -- essentially an animation that mimics naturally occurring phenomena, such as a spring. Apple has been granted exclusive rights by the U.S. Patent and Trademark Office to animate this class of phenomena, oft observed visually in nature.

More surprisingly the jury found Samsung guilty of infringing Apple's U.S. Design Patent No. D618,677 and D593,087, which Apple's attorney's argued in testimony give it exclusive rights to produce rectangular smartphones with rounded edges.

More surprisingly the jury found Samsung guilty of infringing Apple's U.S. Design Patent No. D618,677 and D593,087, which Apple's attorney's argued in testimony give it exclusive rights to produce rectangular smartphones with rounded edges.

Are you ****ing serious? How in the **** did they get such a ridiculous patent?